Shares of chipmaker Taiwan Semiconductor Manufacturing Company (TSM) were trading about 4% lower at the time of writing. The decline was due to the comments made by former U.S. President Donald Trump in an interview with Bloomberg Businessweek. In response to a question about whether he would defend Taiwan against China, Trump said that Taiwan should compensate the U.S. for its defense.
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Trump said, “Taiwan should pay us for defense.” He added, “You know, we’re no different than an insurance company. Taiwan doesn’t give us anything.” He also claimed that Taiwan has taken control of nearly all of the U.S. semiconductor industry.
It should be noted that Taiwan’s dominance in chip manufacturing stems from U.S. companies outsourcing production to focus on more profitable chip design. According to TrendForce data, Taiwan is set to produce about 66% of the world’s most advanced chips in 2024.
U.S. – Taiwan Relations
The U.S. is a key supplier of weapons to Taiwan. Interestingly, in April, the U.S. Congress authorized a foreign aid package that included military assistance for Taiwan.
The package was approved amid rising tensions between China and Taiwan. Importantly, China views Taiwan as a province it intends to control, potentially through military force.
Is TSMC a Good Buy Right Now?
Trump’s comments come at a time when TSMC is investing in new factories, including $65 billion on three plants in the U.S. to boost chip production.
Turning to Wall Street, analysts have a Strong Buy consensus rating on the stock based on 11 unanimous Buys assigned in the past three months. After a 34.2% gain in its share price over the three months, the analysts’ average price target on TSM stock of $184.30 per share implies about 1% downside potential.
